Sources: DeVos mulling partial student loan forgiveness
Defrauded students got full relief under Obama-era policy.
The Education Department is considering only partially forgiving federal loans for students defrauded by for-profit colleges, according to department officials, abandoning the Obama administration’s policy of erasing that debt.
Under President Barack Obama, tens of thousands of students deceived by now-de- funct for-profit schools had over $550 million in such loans canceled.
But President Don a ld Trump’s education secretary, Betsy DeVos, is working on a plan that could grant such students just partial relief, according to department officials. The depart- ment may look at the average earnings of students in simi- lar programs and schools to determine how much debt to wipe away.
The officials were not authorized to publicly com- ment on the issue and spoke on condition of anonymity.
If DeVos goes ahead, the change could leave many students scrambling after expecting full loan forgive- ness, based on the previous administration’s track record. It was not immedi- ately clear how many stu- dents might be affected.
A department spokeswoman did not immedi- ately respond to a request for comment Saturday.
But the Trump team has given hints of a new approach.
In August, the department extended its contract with a staffing agency to speed up the processing of a backlog of loan forgiveness claims. In the procurement notice, the department said that “policy changes may necessitate certain claims already processed be revisited to assess other attributes.” The department would not fur- ther clarify the meaning of that notice.
DeVos’ review prompted an outcry from student loan advocates, who said the idea of giving defrauded students only partial loan relief was unjustified and unfair because many of their classmates had already gotten full loan cancellation. Critics say the Trump admin- istration, which has ties to the for-profit sector, is look- ing out for industry interests.
Earlier this year, Trump paid $25 million to settle charges his Trump University misled students.
“Anything other than full cancellation is not a valid outcome,” said Eileen Connor, a litigator at Harvard University’s Project on Predatory Student Lending, which has represented hundreds of defrauded students of the now-shuttered Corinthian Colleges. “The nature of the wrong that was done to them, the harm is even bigger than the loans that they have.”
A federal regulation known as borrower defense allows students at for-profit colleges and other vocational programs to have their loans forgiven if it is determined that the students were defrauded by the schools. Under the Obama administration, the Education Department updated the rule to add protections for students.
That change was set to take effect in July, but DeVos has frozen it and is working on a new version. She argued that the Obama regulation was too broad.